Financial appraisal refers to the use of financial evaluation techniques to determine the preferred option among various alternatives, often employing discounted cash flow methods, ratio analysis, profitability index, or payback period.
Investment Analysis is the study and evaluation of the potential return and feasibility of a proposed investment. This process assists investors in making informed decisions by analyzing various metrics and methods to project future returns.
In capital budgeting, the payback period estimates the time required to recover the initial investment from cash inflows generated by the project. The major limitation of this method is that it does not consider cash flows after the payback period and, thus, it's not a reliable measure of the overall profitability of an investment.
The Payback Period Method is a capital budgeting technique that calculates the time required for projected cash inflows to equal initial investment expenditure, often used to gauge project risk.
